WTF is… the difference between tokens versus coins?

In this episode, we’re going over a rather subtle difference between cryptocurrency tokens and coins.

Wait! Tokens and coins are different things?!

Now most people use these terms interchangeably. However, this is not exactly correct. Both are types of cryptocurrencies, but have slightly different characteristics.

Let’s explain some more

Coins are usually created on their own native network. Their job? To act as means of transferring value. They are basically digital cash.

Tokens are slightly different. Like their name may suggest, tokens specifically give rights to holders, such as voting or the ability to use a platform.

Let’s use an arcade as an example. Some have games that will only operate on tokens, you cannot put change straight into the machine. You need to transfer your money to that token to play all of these fun games. As in cryptocurrency, a token is required for participation in the ecosystem.

The best crypto-related example of this is Ethereum. Ethereum has it’s own native cryptocurrency, a coin known as Ether. The main purpose of Ethereum is to act as a blockchain foundation for other dApps or projects to develop off of. Many of these projects have created a token as a utility. That currency is considered a token because they represent an asset or a utility.

Still confused about tokens versus coins?

Just think of a coin as money, while a token represents everything else!

WTF IS is our series where we explore some of the most frequently asked questions about blockchains, cryptocurrencies, and the technology surrounding these fields. Looking to get acquainted with blockchain? Then WTF IS is the perfect series for you!

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